GERMANY:BERLIN HAS welcomed Dublin's four-year plan after a warning from German chancellor Angela Merkel that the EU has a long road ahead of it to "work off" Ireland's "mistakes of the past".
The opposition Left Party expressed its “solidarity with the people of Ireland” yesterday and accused Dr Merkel’s government of being interested solely in protecting German bank loans there.
“We cannot agree that a rigid austerity path is being taken just to save the money of boss Josef Ackermann and his friends,” said co-leader of the Left Party Gesine Lötzsch.
Ireland’s austerity proposal was received with only mild interest by analysts in Frankfurt, where Portugal is coming under scrutiny.
“The plan contained much of what the market whisperers already predicted,” said Antje Praefcke, senior FX analyst at Commerzbank in Frankfurt.
Germany is pushing ahead with plans to force investors to accept a potential loss on sovereign bonds in euro zone countries – starting in 2011.
Ms Merkel expressed confidence that the EU was working towards a “common, coherent economic policy that orients itself along our lines . . . the fact that Ireland is applying now, is exactly what we prepared for”.
She added: “For that reason we will view Ireland’s application positively, naturally with a conditionality that makes clear what steps a country has to take to return to the path of stability.”
Dr Merkel reiterated her plan to include sovereign debt investors in state bailouts after 2013. “Do politicians have the courage to support this measure,” she asked, “or should the trade in sovereign debts remain the only area of business in the world to carry no risk?”
A leaked paper from the finance ministry suggested that buyers of euro zone bonds may be asked to accept liability clauses from 2011.
The claim was dismissed as part of a “working paper” by government spokesman Steffen Seibert.
He has caused a stir after noting that “many German banks are weighed down as part of the Irish debt problem, led by, I believe, Deutsche Bank”.